Domino’s Pizza Enterprises Limited (ASX:DMP)

Venturing outside Australia - Domino’s Pizza Enterprises Limited is engaged in the operation of retail food outlets and the operation of franchise services with master franchise rights and network spread across Australia, New Zealand, France, Belgium, the Netherlands and the Principality of Monaco. The group is now focusing on its overseas operations, particularly Europe as the group eyes for expanding its store base. The debate on franchising arrangement though takes a front foot, however, DMP is still managing the business model despite the shortcomings witnessed lately. The Group reaffirmed its full year guidance that was provided last year. The Company focuses on same-store sales growth (SSS) as it was noted that in ANZ, SSS Growth was just 3.7 per cent in 1HFY18 and whereas in the first five weeks of 2HFY18, it was just 5.9 per cent and this disappointed the market which led the share price slips.

As per the trading scenario, the Group has been seen to miss its guidance while delivering its 1HFY18 NPAT growth. Meanwhile, DMP continues to focus on providing great products, service and value to its customers and by investing in its people. As per the recent Domino’s GPS Driver Tracker poll, the group flagged that Origin is the busiest night of the year for the Company, with 65 per cent per cent of customers ranking pizza as their go-to “meal of choice” for game night ahead of BBQs, burgers, and fish and chips. The stock experienced a short interest of 15.13 per cent (as per the latest ASIC report). Moreover, the Debt to Equity Ratio increased from 0.79 in July 2017 to 1.26 in December 2017.


ANZ SSS Growth Trend (Source: Company Reports)

Further, DMP is considered to have good technology platform while its efforts across other geographies like Europe are on track. European network sales increased €33.4m to €298.0m for H1 while Japan sales increased ¥289.3 million to ¥21,037.9 million. In Germany, the acquisition of Hallo Pizza is said to be on track while DMP has flagged its conversion target of 130 stores with 115 Hallo Franchise stores already signing up.

At the same time, a portion of the market does dislike the products offered by DMP and consider venturing into new geographies by DMP is just a means to survive in short to medium term. Nonetheless, the stock price was up since the start of the year. It climbed by 1 more per cent as on 27 June 2018 and closed at $51.95. However, the stock is at higher levels and looks Expensive given mixed sentiments and as enquiry into franchising model has been a troubled zone for the group.

 
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